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  • Writer's pictureCrest Economics

Coal exports to China- Apr 2023 

In recent months, movements of trade between China and Australia have begun to pick up pace with China’s import of Australian coal surging recently. This increase in imports follows a period of trade tensions between the two nations. China and Australia’s bilateral relationship soured in 2020 after the Morrison government inquired into the origins of COVID-19, triggering Beijing wherein they imposed a raft of unofficial and official bans on Australian wine, barley, lobsters, cotton, logs and thermal and coking coal. Prior to this, in March 2020 imports of coking coal reached 4.36 million tonnes, while 5.65 million tonnes of thermal coal entered the Chinese market.

However, despite the ban, Chinese demand for Australian coal has remained strong as ‘high quality Australian coal is highly desired by China’s steelmakers and power plants’. In fact, some Chinese buyers were willing to pay a premium for Australian coal, even as China turned to other coal-producing countries like Indonesia and Russia to meet its needs.

Now, Australia and China have reached a breakthrough with a thawing of ties beginning last year. Coal was in the first range of Australian products that has been allowed to resume being imported. This has led to a surge in shipments as China’s March coking coal purchase from Australia quadrupled from the previous month and thermal coal imports spiked by 14 times. In terms of value, China imported US$92 million of coking coal, up from US$23.7 million in February, while thermal coal shipments rose from US$18.2 million in February to US$256 million last month.

This resumption in trade between China and Australia is seen as a positive development for both countries, in particular Australia. In September 2022, Australia recorded its 13th consecutive current account surplus after booming coal prices and exports drove a record $43 billion trade surplus. This strong growth in export volumes meant an improved trade balance as well as economic growth. Drawing from this, the revival of such coal exports to China is expected to boost economic growth within Australia as well as cultivate a positive trade relationship with China.

This has also highlighted the risks of globalisation, specifically increasing reliance on global supply chains. As the world becomes increasingly interconnected, countries must consider the potential risks associated with their dependence on other nations for goods and services.

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